You have to speculate to accumulate is the saying… and with research and development tax credits it couldn’t be any more true!
If you don’t put in the time and effort to properly prepare your R&D tax credits claim, you may fall through a trapdoor into a series of HMRC enquiries into your claim. You can expect a long and not so nice letter from the HMRC R&D unit, with a long list of questions as well as a request for evidential justification to support your claim.
Submitting an R&D tax credit claim is great if for your project and overall business, but if you get it wrong it could be extremely costly in the long run. HMRC will not hesitate to send you an enquiry and go through your finances with a fine tooth-comb. It will be a long list of invasive questions and requests for evidence to justify your claim.
Once an enquiry begins you can expect HMRC to play hardball and their stance is very tough. It will be an uphill climb to prove your claim is successful.
We want you to submit your R&D tax credit claim for a project which really is an advancement in science or technology. By partnering with a specialist, we can layout the evidence and information in a format which HMRC approves of. Not only this, we will provide the facts and figures in a way which your accountant will love.
Sometimes research and development can be obvious, and other times you wouldn’t expect it to qualify. It is all about understanding the legislation and ensuring you submit claims with eligible costs the way the incentive was designed. HMRC enquiries will only delay your claim and take up unnecessary effort, we recommend the following 5 top steps to take when preparing an R&D tax credits claim.
1. Support your R&D tax credit claim with a technical report and provide this to HMRC
- It isn’t strictly part of the legislation as a mandatory requirement, however HMRC have a team of experts who review the claims. By not submitting a report, you encourage the risk for HMRC to question your claim in depth which is unwanted and sometimes unnecessary work.
2. The R&D technical report needs to provide an outline of the project and answer the following questions:
- What was the driver for the project? Market need, appreciable improvement or was there nothing else like it?
- What kind of challenges did the project face. Was there technical uncertainty which required additional resources and planning to overcome? Would this advance science or technology?
- Is this new knowledge available from an “off the shelf” solution or is this bespoke to your company and situation?
3. Record R&D effectively on an ongoing basis
- Recording each and every persons involvement who is directly engaged in the R&D project, it could be development, meetings, testing etc. Making sure we identify all qualifying expenditure helps to maximise your claim.
4. Make sure you submit your R&D tax claim on time and don’t leave it to the last minute.
- A business can make claim for R&D tax relief going back 2 accounting years. The claim can be made in a company tax return or in an amendment to it. You have up to 9 months after your year end to submit an amendment so it is crucial you do not miss this deadline otherwise you could lose thousands.
5. Choose your R&C partner carefully. Lack of knowledge, experience and resources can mean you will be worse off, not them.
- Choose a reputable firm who specialise in Research and Development tax credits. They will enhance your claim, ensure everything that is eligible is included and guide you for future projects. Specialists will either have a niche sector or be able to apply knowledge or similar projects to your own so you get the best possible outcome.
Do you qualify for R&D Tax Credits?
HMRC started this incentive for R&D Tax Credits / Relief in the year 2000 and it has grown from strength to strength. If you are UK limited company who has conducted some form of innovative work, you could be eligible!
Providing a project contains a level of technological or scientific uncertainty and must seek to achieve an advancement in technology. If the team involved with a project were scratching their heads to find a solution to technological challenges, that’s a good indication that qualifying Research and Development activities were taking place.
If you’d like more information on R&D tax credits, please get in touch today!